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Providing negative cost public projects under a fair mechanism: An experimental analysis

1st Person: Güth, Werner
Additional Persons: Koukoumelis, Anastasios; Levati, M. Vittoria; Ploner, Matteo
Type of Publication: Paper
Language: English
Published: Max Planck Institute of Economics 2013
Series: Jena Economic Research Papers
Online: https://www.econstor.eu/bitstream/10419/85040/1/766266591.pdf
Description: This paper experimentally examines a procedurally fair provision mechanism allowing members of a small community to determine, via their bids, which of four alternative public projects to implement. Previous experiments with positive cost projects have demonstrated that the mechanism is efficiency enhancing. Our experiment tests whether the mechanism remains conducive to efficiency when negative cost, but less efficient, projects are made available. We find that this is not the case. On the other hand, we detect no significant difference in bid levels depending on whether mixed feelings are present or absent, and on whether the others´ valuations are known or unknown.

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